The Securities and Exchange Board of India (SEBI) has enforced a five-year prohibition against notable industrialist Anil Ambani and twenty-four other individuals, encapsulating former Reliance Home Finance top executives. This measure comes as a consequence of their roles in misappropriating company resources.
A comprehensive financial deceit has been unearthed at Reliance Home Finance Ltd. (RHFL), with Anil Ambani among the pivotal figures implicated. The deception centred on diverting a substantial quantity of the firm’s finances through questionable loan transactions, inflicting considerable losses on the shareholders.
During the fiscal years 2018 and 2019, RHFL extended Guaranteed Payment Credit (GPC) loans worth several thousand crores. These financial help were extended to firms characterized by dire financial states, evidenced by negative net worth and insubstantial assets, alarmingly sanctioned with no collateral or security pledged.
The managerial practices at RHFL repeatedly strayed from established credit evaluation norms. Loans were sanctioned to financially unstable borrowers, blatantly disregarding internal credit assessments and the essential evaluations to gauge default risks. This negligence facilitated the unchecked sanctioning of high-risk loans.
Despite a clear mandate from RHFL’s Board on February 11, 2019, to discontinue the issuance of GPC loans, the practice persisted, including approvals attributed to Anil Ambani in his role as the group’s leader. This blatant disregard for board directives underscored significant lapses in internal governance.
Investigations have disclosed that the recipients of GPC loans and the entities to which funds were funnelled were affiliates of the promoter group. Ensuing guarantees by companies within the promoter circle served to solidify these connections. Upon raising flags about the dubious nature of these loans and their recovery prospects, the Statutory Auditor PWC resigned in June 2019.
SEBI has levied fines of ₹27 crore on Amit Bapna, ₹26 crore on Ravindra Sudhalkar, and ₹21 crore on Pinkesh Shah, in addition to imposing ₹25 crore penalties on several involved entities. These fines address the implicated parties’ participation in facilitating or profiting from the unlawful financial disbursements.
SEBI’s findings underscore that as the ADA Group’s Chairman and principal promoter of RHFL’s holding entity, Anil Ambani was central to orchestrating the fraudulent loans. His authority enabled the sanctioning of hefty loans and channeling funds to associate companies.
Bapna, previously serving as RHFL’s CFO and a Credit Committee member, was instrumental in authorizing these loans, even amidst deviations from procedural norms. His actions defied the board’s directive to stop such disbursements.
As RHFL’s CEO, Sudhakar oversaw the sanctioning and administration of these loans. SEBI highlighted his disregard for the board’s cessation directive and his failure in fund recovery or guarantee enforcement, which aggravated the company’s financial instability.
Lastly, Shah, the CFO accountable for the financial and accounting operations, endorsed the company’s financial statements as precise despite being aware of the contentious loan activities and the auditor’s reservations.